Wright & Wright & Anor (SSAT Appeal) - [2009] FMCAfam 979

FEDERAL MAGISTRATES COURT OF AUSTRALIA

WRIGHT & WRIGHT & ANOR (SSAT APPEAL)

[2009] FMCAfam 979

CHILD SUPPORT – Departure from assessment – special circumstances – income or other financial resources – capacity to borrow not generally considered income or a financial resource.

CHILD SUPPORT – Departure from assessment – other matters – justice and equity – requirement to consider necessary commitments for self support.

Bankruptcy Act1966, Part XI
Family Law Act 1975, ss.79 & 117
Federal Proceedings (Costs) Act 1981
Child Support Assessment Act 1989, ss.4 & 117(4)

Charnock & Bullions (SSAT Appeal) [2008] FMCAfam 36
Collins & Collins (1977) FLC ¶90-286
Gollings & Scott [2007] FamCA 397
Gyselman& Gyselman [1991] FamCA 93; (1992) FLC ¶92-279; (1991) 15 Fam LR 219
Hallinan v Witynski [1999] FamCA 1127; (1999) FLC ¶98-009; (1999) 25 Fam LR 647
Hides and Hatton [1997] FamCA 28; (1997) FLC ¶92-759; (1997) 21 Fam LR 855
La Costa & La Costa [2007] FamCA 1176
Magee & Magee [2008] FMCAfam 856
Milankov & Milankov [2002] FamCA 195; (2002) FLC ¶93-095; (2002) 28 Fam LR 514
Parrish & Torrey (SSAT Appeal) [2009] FMCAfam 274; (2009) 41 Fam LR 236.
PJ & Child Support Registrar (SSAT Appeal) [2007] FMCAfam 829; (2007) 38 Fam LR 31
Ross & McDermott [1998] FamCA 134, (1998) FLC ¶98-003
Tyagi & Meares (SSAT Appeal) [2008] FMCAfam 886; (2008) 39 Fam LR 604
Walters & Walters [1986] FamCA 8;(1986) FLC ¶91-733; (1986) 10 Fam LR 1006

Applicant:

MR WRIGHT

First Respondent:

MS WRIGHT

Second Respondent:

CHILD SUPPORT REGISTRAR

File Number:

MLC5659 of 2009

Judgment of:

Riethmuller FM

Hearing date:

19 August 2009

Date of Last Submission:

19 August 2009

Delivered at:

Melbourne

Delivered on:

14 September 2009

REPRESENTATION

Counsel for the Applicant:

Mr Potter

Solicitors for the Applicant:

Goddard Elliott

Counsel for the Respondents:

Ms Buchanan

Solicitors for the Respondents:

Victoria Legal Aid

ORDERS

That the appeal be allowed;
That the decision of the SSAT be set aside;
That the application be remitted to the SSAT to be heard and determined according to law;
That there be no order as to costs.

IT IS NOTED that publication of this judgment under the pseudonym Wright & Wright is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLC5659 of 2009

MR WRIGHT

Applicant

And

MS WRIGHT

First Respondent

CHILD SUPPORT REGISTRAR

Second Respondent

REASONS FOR JUDGMENT

This is an appeal from a decision of the Social Security Appeals Tribunal dated 29 May 2005 with respect to the child support assessment of the parties.
The Tribunal set the child support income amount for the Appellant at $80,170 per annum for the period of 25 June 2008 to 31 December 2009 and set the Respondent’s child support income amount at $47,218 per annum. In addition, for the six months of 25 June 2008 to

31 December 2008, the Tribunal increased the annual rate of child support (calculated in accordance with the formula based upon the income amount the Tribunal set) by $18,814. The Tribunal determined that from 1 January 2009 until the end of 2009 the formula assessment be increased by $15,690 per annum.
The parties have three children the subject of the child support assessment (their eldest child is now over 18): D born 1991, R born 1994 and DN born 1997.
The Tribunal considered a number of issues in the case. First, the Tribunal concluded that there were special needs with respect to each of the children’s medical care. However the Tribunal ultimately concluded, that there was not sufficient evidence of the actual costs to determine what amount should be taken into account in adjusting the assessment.
Secondly, with respect to school fees, the Tribunal accepted that the children had been enrolled in private schools for many years. There was no issue between the parties as to their expectation that the children would have a private school education. The real issue in the case was whether or not given the current financial circumstances of the Father, he could continue to meet those school fees. The school fees for 2008 were $37,768. The school fees for 2009 are $31,380 (see para.43 of the SSAT decision).
Thirdly, the Tribunal examined in some detail the income earning capacity of the parties, ultimately concluding that the father was currently earning $84,000 per annum. In coming to this conclusion, the Tribunal found that there was no evidence that he had ever received a manager’s incentive payment, and that he had reduced his working hours from 45 hours per week to 37.5 per week on medical advice as a result of hypertension. The Tribunal accepted that his taxable income in the 2007/2008 financial year was $80,170.
When considering the income of the Appellant, the Tribunal also made findings of fact with respect to debts of the Appellant. The first debt was the sum of $60,000 loaned to him by a company associated with his employer in order to enter into a Part IX agreement under the Bankruptcy Act with respect to debts arising from taxation consequences of events that took place before the parties separated. This was a loan of $60,000. In addition, the Appellant had borrowed $13,000 to pay out his obligations under family law property orders with respect to the Wife’s motor vehicle. He also purchased, through a company associated with his employer, a Prado motor vehicle which requires loan repayments of $978 per month. He needed a car for his own use (although it is also used in his employment to travel to and from work). His total repayments are $2,194 per month on a 24 month term that comes to an end on 30 June 2009. At the end of the

24 months he had to re-negotiate the loan as there was still more than half of the principle owing.
In determining what child support rate would be ‘just and equitable’ as required by s.117(4) the Tribunal stated:
The 2008 school fees
[90] The Tribunal is satisfied that the children were attending these private schools as a result of their parents’ joint intention that they be educated in the private school system. The Tribunal is satisfied that the cost for 2008 was $37,768. While [the Respondent] incurred further expenses in relation to school uniforms and school books, the Tribunal is satisfied that she would have incurred some costs for books and uniforms irrespective of what schools the children attended and such costs are ordinary costs included in the annual rate determined by the child support formula.
[91] The Tribunal is also satisfied, notwithstanding [the Applicant] statement that he can no longer afford these fees and the letter from his solicitor stating he will not be responsible for further private fees, that he has been aware that the children have continued to attend their private schools since 2007. In these circumstances, it is just and equitable to the children and to the payee that [the Applicant] pay one half of these fees in the 2008 year, namely $18,884. As noted above, some of [the Applicant’s] loans come to an end at the end of this month. [H] clearly hold him in high regard. They were willing and able to help him with his finances in 2007. [The Applicant] should pursue enquiries to see if this or a similar facility can be made available to him again.
An equal division of the school fee costs was also discussed by the Tribunal with respect to 2009. Why the Tribunal struck a figure of 50% is not clear from the decision, and does not appear to bear any relation to the income and financial resources the parties. At present the school fees are clearly an expense of the Wife as the Husband has advised the school he will no longer accept liability. Therefore the fees should be taken up as an expense of caring for the children, in determining the costs of maintaining the children. Once it has determined the costs of the children the Tribunal should then turn to consider the capacity of the Appellant to contribute to those costs along with the capacity of the Respondent to contribute to those costs.
When considering the matters under section 117(4) the Tribunal does not appear to have considered what the costs for caring for the children actually are, only the school fees.
In dealing with capacity of the Applicant they state:
[101] The Tribunal’s decision should result in [the Applicant] being assessed to pay child support for the period 25 June 2008 to 30 June 2008 (6 days) at an annual rate of $39,343 (being $20,459 plus $18,884 school fees). The amount payable for these six days should be $646.73. From 1 July 2008 to 31 December 2008 [the Applicant’s] annual rate of child support should be $36,446 (being $17,562 plus $18,884 school fees) or approximately $1,400.00 a fortnight. Taking into account that D will not turn 18 until 14 December 2009 [the Applicant’s] annual child support liability will be $33,252 ($17,562 plus $15,690) which is $1,278.92 a fortnight. The child support will assist [the Respondent] to meet the proper needs of the children.
and:
[104] [The Applicant’s] Statement of Financial Circumstances disclosed his sole source of income being $1,615 a week from his employment as the [in the Healthcare Industry]. His recurrent weekly expenses are his tax, $405, child support $360, and his personal loans of $505, which total $1,270. His disposable weekly income is $345. He lists weekly expenses totalling $430. [The Applicant] has remarried and he lives rent free in his wife’s home. He says that she has supported him from time to time in meeting expenses. He does not contribute to her support.
The Tribunal then concluded that:
[105] The Tribunal has taken into account [the Applicant’s] current financial position and that the making of the determination may cause him some hardship. To not make the determination would cause hardship to [the Respondent] and to the three younger children. In balancing these hardships the Tribunal has taken into account that [the Applicant] has had access through his employment at the [workplace omitted] to finance from [the company associated with the employer] and therefore has that option available to him to accommodate the Tribunal’s determination.
The Tribunal accepted that the weekly tax expenses of the Appellant are $405, and that his loan repayments are $2,194 per month. However the Tribunal set his child support rate at $36,436 per annum for the last six months of 2008 and $33,252 per annum for the 2009 calendar year.
It is apparent when one annualises each of the above figures that the total is:
a)Income  $84,000
b)Less Taxation                   $21,060
c)Less Loan Repayments    $26,328
d)Less Child Support          $36,436
e)Total  $     176
In 2009 his child support reduced to $33,252 per annum, increasing his disposable income from $176 per annum to $3360 per annum.
It is difficult to understand how a person could be assessed to pay child support at a rate which meant that after tax, child support, and unavoidable debts, the person is left with around $3.50 per week for living expenses.
The Tribunal has attempted to deal with this difficulty by making findings with respect to the possible capacity of the Appellant to borrow money. At para.69 the Tribunal said:
… his repayment history may also provide him with capacity to borrow again from [the company associated with his employer] to access the funds he will be required to pay to meet the child support arrears and meet the children’s school fees.
By the end of the decision the SSAT had elevated this possible source of revenue to the Appellant to a finding of certainty of availability of finance (see para.105).
Put simply, this is a case where the Appellant does not have the financial capacity to pay child support at the rate set by the Tribunal as it consumes almost all of his disposable income without taking account of any day to day living expenses. The Tribunal clearly erred in failing to consider the Appellant’s day to day living expenses as a necessary commitment that he must meet, and which must be taken into account under s.117(4).
This was not a case where the debts should be disregarded for any reason. The debts were not caused by reckless expenditure, or a course of conduct designed to defeat child support claims. It is not a case where borrowings were simply a method of converting capital resources into liquid funds: see generally the reasoning in Collins & Collins (1977) FLC ¶90-286. Whilst the majority decision in Milankov & Milankov [2002] FamCA 195; (2002) FLC ¶93-095; (2002) 28 Fam LR 514 did allow a judgement for a little over the amount of the pool of assets, the circumstances supporting that were quite unusual, and certainly nothing of this ilk was demonstrated in the SSAT decision.
The artifice of finding that a person can pay child support at a far greater level on the assumption that they could borrow money, when they have no assets for security, nor any other financial resources, was simply not open to the Tribunal in this case. The rejection of such a reasoning process occurred long ago in the Family Court where the Court made clear that ‘a capacity to borrow is not property’: per Lindemayer J in Walters & Walters [1986] FamCA 8; (1986) FLC ¶91-733; (1986) 10 Fam LR 1006 at [17]. This has been confirmed recently by the Full Court of the Family Court in Gollings & Scott [2007] FamCA 397, and in La Costa & La Costa [2007] FamCA 1176 where Bryant CJ, May and Boland JJ said:
70. We are conscious of numerous decisions … from which it is obvious that there is no power to make orders for the payment of moneys when there is neither property available from which such a sum could be raised nor any fund of money.
The judgement of Coker FM, in Magee & Magee [2008] FMCAfam 856 provides a good example of the application of the principle, where his Honour said:
[97] … there is obviously no borrowing capacity, particularly if all of the existing matrimonial property is transferred to the wife. But what does exist is the prospect or possibility of further loans or gifts from the husband's parents, but there is, of course, no obligation upon them to provide such monies and it would be, in my assessment, a nonsense to make an order requiring the payment of monies which there is no guarantee of or capacity to pay.
I am mindful that the authorities deal with property division under s.79 of the Family Law Act 1975 and not child support or maintenance. However, the underlying reasoning remains the same: one cannot, as a general proposition, order that payment be made from an asset that does not exist. In some cases the circumstances of the loss of assets or the nature of financial resources may show that it is appropriate to depart from the general principle, but the underlying rational of those cases is that there is (or ought to be, but for the conduct of one of the parties) an asset or resource available that is referable to the borrowings. This underlying rationale is in accord with s.4 of the Child Support Assessment Act1989, which relevantly provides:
4 [Objects of Act] (1) The principal object of this Act is to ensure that children receive a proper level of financial support from their parents.
(2) Particular objects of this Act include ensuring:
(a)that the level of financial support to be provided by parents for their children is determined according to their capacity to provide financial support and, in particular, that parents with a like capacity to provide financial support for their children should provide like amounts of financial support; and
…
(d)that children share in changes in the standard of living of both their parents, whether or not they are living with both or either of them; and
…
The errors of reasoning in this case, like many other successful appeals, appear to flow primarily from the failure of the member to quantify the periodic rate of child support proposed and consider that rate in the context of findings of the actual income and expenses of the parties: see, for example, Gyselman& Gyselman [1991] FamCA 93; (1992) FLC ¶92-279; (1991) 15 Fam LR 219, Hides and Hatton [1997] FamCA 28; (1997) FLC ¶92-759; (1997) 21 Fam LR 855, Hallinan v Witynski [1999] FamCA 1127; (1999) FLC ¶98-009; (1999) 25 Fam LR 647, Ross & McDermott [1998] FamCA 134, (1998) FLC ¶98-003, PJ & Child Support Registrar (SSAT Appeal) [2007] FMCAfam 829; (2007) 38 Fam LR 31, Tyagi & Meares (SSAT Appeal) [2008] FMCAfam 886; (2008) 39 Fam LR 604, Charnock & Bullions (SSAT Appeal) [2008] FMCAfam 36, Parrish & Torrey (SSAT Appeal) [2009] FMCAfam 274; (2009) 41 Fam LR 236.
Put simply, s.117(4) requires that Tribunal to identify and consider what the practical outcome of the actual change in week to week income and expenses will be for the parties and children. The importance of this process is clear: a simple mathematical formula cannot be expected to model the complexities of the vast array of modern family situations. The departure provisions are designed to provide a method of identifying cases where the formula does not produce an appropriate outcome, and then to set a rate of child support that meets the unique needs of each of those individual families.
For these reasons the appeal must be allowed and the case remitted for re-hearing according to law.

Costs

The appellant seeks costs. Costs must be considered in accordance with s.117 of the Family Law Act 1975.
In this case the appellant was entirely successful on the appeal. There were no offers made. The respondent was legally aided. The costs were not affected by the failure of either party to comply with orders or directions. Neither party is in a strong financial position. The respondent faces considerable difficulties with respect to school fees.
Unfortunately the Federal Proceedings (Costs) Act 1981 does not cover appeals from the SSAT. If it did cover these proceedings, I would have issued the relevant certificate.
Having regard to all of the factors set out in s.117 of the Family Law Act, I am not persuaded that a costs order is appropriate in this particular case.

I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of Riethmuller FM

Associate: Tracey Jones

Date: 15 September 2009